Field of the Invention
The embodiments of the present invention relate generally to systems and methods for trading financial instruments and, more particularly, to systems and methods for managing customer credit limits and determining credit risk to quantify certainty of clearing.
Description of the Related Art
With the advent of new laws, such as the Dodd-Frank legislation, the ability to determine credit risks and increase clearing certainty has become more important to traders.
On Mar. 20, 2012, the U.S. Commodity Futures Trading Commission (CFTC) issued final rules under Title VII of the Dodd-Frank Act for clearing members of non-security-based swap clearinghouses. The final rules are directed to parameters for documentation between customers and swap clearing members, the timing of acceptance/rejection of swaps for clearing by clearing organizations and clearing members, and risk management protocols.
Under the Dodd-Frank Act, certain clearing members must establish credit-based and market-risk-based limits on clearing customers' swap position sizes, order sizes, margin requirements and other related factors. Such cleaning members are also required to use automated means to screen orders for compliance with these risk-based customer limits and monitor for adherence to risk-based limits both intraday and overnight.
Accordingly, there is a need for trading systems and methods that manage customer credit limits and assess credit risks and clearing certainty of trades.
It should be noted that although the below description describes the systems and methods of the present invention in the context of financial trading platforms, it can be appreciated by one of ordinary skill in the art that certain aspects of the present invention can be used in conjunction with other products and applications without departing from the scope of the invention